Microeconomics
Introduction
Things are seldom what they seem; skim milk masquerades as cream
Gilbert and Sullivan
A spate of radical books accompanied and supported the political struggles on the 1960’s. These works probed for the rational economic roots beneath the surface irrationality of our various social problems. Their explanation of the Vietnam War, for example, focused on capitalist calculations regarding expanded markets an cheap labor rather than the President’s uncontrolled urge to flaunt his political hardball. Of course the dictates of material interests were not always direct (the economy was admittedly very political), but enough could be uncovered about the economic basis of our problems to assure us that the only solution to capitalism was socialism.
It was a decade of bombardment, as deteriorating conditions and heightened demands converged on the system and its defenders. Among those defenders, the mainstream economist (herein, simple, the economist) was hard pressed to respond to those who called for the end of rather than changes in capitalism. From a Marxist point of view the economist’s optimism about solving our social problems under capitalism was a whole cloth fantasy, yet radicals too often found it difficult to effectively challenge them without appearing whiny, irrelevant or utopian. That difficulty provides the motivation for this paper.
This paper is an attempt to examine how a world view accommodates threatening input—how sophisticated economists can remain non-radicals; and an investigation into the roots of their persuasiveness; the will-o’wisp techniques that are used in that process of adaptation.
My approach is textual analysis of a popular and representative introductory economics text book, Microeconomics: Analysis and Policy, by Professor Lloyd G. Reynolds of Yale University, 1973. The extensive use of direct quotations stems from the fact that this is a paper on how to read and thus the Reynold’s text represents the relevant raw material The reliance on quotations also stems from my belief that, as much as possible, the ideological richness of his work should be allowed to speak for itself.
We begin with a very brief summary of the economist’s Utopia: an idealized state which has been sought by al such economists throughout modern history.
The worldly perfect
“Tis so,” said the Duchess: “and the moral of it is “Oh! Tis love that makes the world go round! Somebody said, whispered Alice, “that is done by everybody minding their own business!”
“Ah, well! It means much the same thing," said the Duchess
Quoted in Reynolds, p.22
Happiness for the economist is everyone minding their own business or striking their best deal with those who do. We compete for resources said to be scarce. Happiness is increased by purchasing something and purchasing it alone. Impersonal market interactions between free buyers and sellers as well as between consenting employers and employees lead to prices and wage levels that just manage to satisfy all. Market stability is a precarious dynamic, and economic man lives his entire life exploring how far he can push its margins without retaliation.
The first lesson economic man learns is that if his product is irreplaceable he can push those margins further than someone who is selling something—of or by himself—that can be easily replaced in this perpetual auction. And so the second lesson deals with his attempts to simulate the effects of irreplaceability; in induce monopoly by conspiring with potential competitors to limit their output. This applies equally to labor (restrictive unions) and to management (lowered output). In efficiency and price gouging invariably accompany this breakdown of the mutually restraining equilibrium.
Provided that all citizens have equal access to the starting gate of life, the market’s countless interactions will yield nearly instantaneous feedback on our abilities and desires. It will, according to its most famous proponent, Milton Friedman, bring us as close as we can come to unfiltered democracy:
The role of the market is that it permits unanimity without
conformity; that is it is a system of effectively proportional
representation. On the other hand, the characteristic feature
of action through explicitly political channels is that it tends
to require or to enforce substantial conformity.
(“The Role of Government in a Free Society” in Controlling Pollution,
Marshall Goldman, Ed. Prentice-Hall, 1967 p.74)
The need for “unanimity without conformity” rests on a vital assumption about our real nature:
The [economist] conceives of men as imperfect beings. He
regards the problem of social organization to be as much a
negative problem of preventing “bad” people from doing harm
as of enabling “good” people to do good…
(Capitalism and Freedom, University of Chicago Press, 1962, p.12)
The purifying aspect of competitive capitalism prevents the economist from appearing soft headed or utopian, while pacifying those who fret about the morality of an ideal which glorifies the combative individual. For no one has any more power than their ability to serve the people grants them. The discipline of the market insures that the best capitalists are in effect the best communists, as it manages (without managers ) to maximize our utility by correctly allocating (without quotas) our resources.
In this world, consumers purchase goods and services provided by firms headed by our most productive citizens, at prices which satisfy the public directly and the worker indirectly. It is important to mention that Reynolds never explicitly claims that this self-righting utopia describes the real world:
No such economy actually exits. The economies of the Western
industrial nations bear some resemblance to this abstract
picture; but we should be careful not to equate the two (24)
In fact, their blatant worship of the free market ideal is one reason why many students began to seriously question the value of formal economics. It is, then, in the context of burning ghettos and intellectual dissatisfaction that Reynolds begins the process of adaptation.
Now the radical
There is, it seems, no criticism of our social system too strong or cutting for Reynolds not to have made it himself. The Marxist classic, Monopoly Capital, for example, discusses the rise of the sales effort in oligopolized corporate behavior:
Price competition has largely receded as a means of attracting
the public’s custom, and has yielded to new ways of sales
promotion; advertising, variations of the products’ appearance
and packaging, model changes and the like.
(115 Paul A. Baran and Paul M. Sweezy, Monthly Review Press, 1966)
Reynolds responds in kind:
With price cutting frowned upon as “unethical,” the struggle
for sales is diverted largely into product variation and
intensified selling efforts. (165)
Baran and Sweezy counter with a telling indictment of capitalism’s inability to provide full employment without the venality associated with a militaristic state:
The difference between the deep stagnation of the 1930’s and
the relative prosperity of the 1950’s is fully accounted for by
the vast military outlays of the 50’s..if the military budget
were reduced to 1939 proportions, unemployment would also
revert to 1939 proportions. (154)
Reynolds is once again not to be denied:
Unless aggregate demand for labor can be held at a higher
level than in past peacetime periods, unavailability of
jobs will quickly undermine the effort to enforce a work
requirement (299)
Reynolds virtually regales us with instances of capitalist thievery; of selfish highway trusts, misleading advertising by overcharging monopolists, waterways polluted by self-seeking private interests, union busting in the South, black families having to live in apartments owned by absentee landlords etc. He has taken pains to steal the thunder of the radical critic (without crediting his/her existence).
But while granting the very problems that lead to radical anthologies, Reynolds is remarkably optimistic about the future of American capitalism and its ability to solve these problems.
Now the liberal
Granted, Marx had a point about the tendency towards monopolization, but when some of the boys go on a conglomerate bender, one need not go overboard to get them back on board:
In assessing the prospects of antitrust, then, one needs a reasonable balance between unwise optimism and undue pessimism. It is incorrect to say that we can do nothing about concentrated market power. But it is fair to say that we cannot do anything very spectacular very quickly or by relying entirely on one approach. A variety of tactics is needed, with a view to making gradual progress over the years. (186)
The well worn facts about that tiny percentage of our population which controls most of our national wealth are not ignored. And he is appalled—but not threatened—by the existence of poverty:
The American fiscal system involves a substantial downward redistribution of incomes. This is essentially a transfer from families with incomes above $10,000 to those with incomes below $4,000 (291)
The problem [of poverty] is now small enough that it is clearly within our fiscal capacity to eliminate it (291)
So Reynolds is not a dogmatic free market maniac: poverty is a problem to be solved. Fiscal intervention is acceptable. Nor is he the radical who sees widespread underemployment as a necessary concomitant of labor stability under capitalism. It is a problem, but one to be solved gently. His discussion of an income redistribution policy which would affect on y the rich reveals this caution at work:
Whether this would be fair is another matter…the man who last year paid a million dollars for piece of Manhattan real estate, expecting it to yield him $50,000 a year, is no different than other men who bought corporate stocks or government bonds. He would have a legitimate complaint if the rules of the game were suddenly changed and a special tax imposed on income from one type of property. This would amount to a partial expropriation of those who had been unlucky enough to buy land…(276) (emphasis added)
His apparent ideological scope can best be illustrated by showing how he relates to one particular subject—education.. First he is the consummate conservative, praising an educational system that identifies members according to productivity:
A better educated manager or supervisor increases the productivity of those working under him…the educational mechanism helps to sort people out by level of ability, an important function in any economy..(347)
Next we have to deal with a fiery Red making cynical claims about induced scarcity resulting from the cozy relation between the educational and vocational hierarchies:
It is not always recognized that the educational system is our most important labor market institution…High educational requirements are a convenient way of reducing the surplus of applicants for attractive jobs to manageable proportions. (244)
To a considerable extent, then, the educational system is an instrument of social stratification, preserving the position of advantaged and disadvantaged families from generation to generation. (245)
But seemingly at the last minute, the radical is transmuted into the liberal; the hardened pessimist into the optimistic policy maker:
But it also provides a channel of opportunity. Many bright children from poor families do climb the educational and occupational ladder. The policy problem is to increase the element of opportunity in the system and reduce the amount of sheer hereditary transmission. (245)
How did we get from the global cynicism about the political economy to a marginal concern with increasing the number of poor people in elite school? How die we get back into the system? Are there root consistencies beneath the surface contradictions?
To answer these questions, we must analyze how a combination of his belief in his Utopia and his misapplying it concretely enables him to appear to stand aside from the system yet prevent the reader from ever seeing past it.
The heart of this non-conscious “method” is a two-fold manipulation of the appearance /reality split.
(1) He continually shifts the reader between the illusions of his Utopia and the facts of our world; conflating empirical evidence with the presuppositions of his model. This allows him to draw politically safe conclusions about policy options.
(2) This shifting enables him to cultivate his own appearance/reality split by masking his class and system-dependent interests behind the façade of technocratic disinterest
The methodology of adaptation
The [appearance], which makes the actual relation invisible…forms the basis of all the mystifications of the capitalist mode of production, of all its illusions as to liberty, of all the apologetic shifts of the vulgar economists.
Karl Marx, Capital Vol. 1, p. 540
The economist’s primary aim is to neutrally guide choice; to resolve conflicting resource claims. Following the model of the disinterested physical scientist for whom, as it were, one electron is much the same as another, the unsentimental economist must avoid subjective or ideological weighting of claims.
Where the line should be drawn between public and private production of quasi-public goods is an intriguing frontier area of economics. A generation of two ago this was considered an ideological issue, with socialists and anti-socialists arguing from supposedly basic principles. Today it is approach increasingly in terms of what will work beset in a particular situation, with economics being called on to provide the informational background…(311)
Reynolds is a master at appearing to do this. The essence of this process is the wrongful equation of fundamentally different entities by virtue of a characteristic which they formally share. This allows him to paint a picture of substantive equality.
We will examine some of the characteristics which are used to make such false equations.
Vulnerability
Taxes are paid mainly by those whose incomes are most visible and vulnerable; civil servants and other salaried people, and large business concerns. (340)
Through the shared, formal characteristic of occasional visibility multinationals are leveled so as to be equal in a vital respect—vulnerability—to civil servants. Were the writer to baldly sate that the two felt the same relative tax burden, mirth would result. But by this rather tricky process of association, an unconsciousness imprint of significant parity is left. This will be seen to have its political uses.
Risk
Reynold’s treatment of risk is somewhat more complicated. Among his many justifications for income inequality is the greater risk involved in being a lawyer, storekeeper or corporate executive than in being a bricklayer or gardener (his examples). Leveled out of this formulation are the differences I magnitude and consequence of the risks by different classes; what it means for her family when her client loses the big court case compared with what it means for her family when she dives into an empty secretarial pool. Risk equals risk. Gardeners trade some of that lawyerly risk for pastoral tranquility just as coal miners trade off a bit of soot for that higher income:
High wages are sufficient, at least for some workers, to offset the natural unpleasantness of the work and the industry is able to recruit a labor force. Coal mining is a good example. (36)
By virtue of the formal fact that any occupation has some element of risk, we are led into believing that if inter-job risks are not strictly equal, at least the reward structure is proportional to those risks. And, by implication, fair.
Power and freedom
A dominant theme of the book is the dynamic of shared power. Ours is a complex system of checks and balances:
It may be possible to build up offsetting power on the buying side of the market. One example is chain stores and mail order houses which are able to bargain with large manufacturers on equal terms and can also exercise the option of setting up their own manufacturing plants. Another obvious example is trade union organizations to offset the employer’s inherently superior position in the labor market. (134)
Formally identified here are the factors of production that both sides must bring to trade in the market: capitalists bring the means of production, and workers bring their collective labor. An agreement is reached, therefore a balance exists. Though both sides feel their respective economic compulsions—they both have to eat—there is enough to go around. Of course, some capitalists have more ambition than others, and some workers freely decide to upgrade their lifestyles:
Married women, on the other hand, usually have a real alternative between taking jobs and not taking them. This group shows a growing preference for work outside the home (28)
A worker with a high preference to income may even hold two jobs at the same time. These people are often called “moonlighters,” and there are now several million of them. (28)
Yet it is a giant leap of faith to go from this surface identity to the implication of pluralistic co-equality. While he may have a point about Sears (it can change manufacturers or change into one if necessary), no such option exists for the employees. Working, acting collectively, can make the profit picture sufficiently bleak to drive a capitalist out of business, that that is really all they can currently do.
Those who own the means of production make investment decisions; and relative to those they hire, exercise free will in such maters. Unlike workers, capitalists have direct access to capital—hence the name.
There are a number of conceptual shifts involved here. In the market place model, the logic of competition dooms the capitalist to earning just enough to avoid the temptation to work for the capitalist down the street. By intertwining his conception of Utopia and his description of reality. Reynolds manages to give the impression that our capitalist are but a few bad managerial decisions away form becoming proletarianized.
A second shift is numerical. In order to equate the capitalist and the worker, one must first collectivize the worker. Reynolds himself points that out. But the rewards for capitalists are truly individual while those that go for labor must be divided among just a many people as it took to “equalize” the conflict in the first place. This disaggregation is quietly forgotten. Collectively labor has undeniable strength. But that strength is then falsely transposed—shifted—onto its individual components, and an implicit equality between the capitalist and the worker as individuals lingers.
Lost from these examples of formal equality is any feel for tonal differences. In the name of objective reconstruction our critical faculties are stripped. Distinguishing features of the landscape (rich is different than poor, corporation is different than individual) are removed. The reader is guided to believe that she is not taking sides and comes to see the worker as just another pesky factor of production. Worker and capitalist are both out for the same thing: both are, in the aggregate, equally powerful, vulnerable, free and are paid in proportion as they are willing to undertake risks.
Real differences in the lives of both groups, with their obvious potential for inducing political sympathies in the reader are eliminated. Instead the reader is guided towards an “it’s-all-the-same” mentality when allocating support or blame in class conflicts.
Having been leveled and stripped, we must now examine how our critical faculties are reconstituted. Basically, we are reborn through a universally applicable methodology for dealing rationally with the endless tradeoffs that constitute economic life. This neutrality is made possible in part by the leveling out process just described. My claim is that Reynolds is led to elevate that methodology beyond just cause. That is, his appearance of neutrality is just that. And again, a political function is served.
The methodology continued
Political economy takes for granted what it is supposed to evolve. The political economist assumes in the form of fact, of an event, what he is supposed to deduce.
Karl Mark, The Economic and Philosophic Manuscripts
Reynolds elevates tools and vision appropriate to our system so that they appear to possess universal applicability. This begins to emerge in his “solution” to a classical paradox of economics: why ornamental diamonds cost more than life-sustaining water. He is, to mix a borrowed metaphor, treading on very thin milk:
The total utility yielded by water is very great…Since water is relatively abundant, however, the marginal utility of the last gallons used is low. Diamonds, on the other hand, are rare relative to the desire for them, so their marginal utility is high. The satisfaction yielded by the last unit of a good and hence the price people can be induced to pay for it is measured by marginal rather than total utility. This is why diamonds cost more than water. (68)
Now to ask why diamonds cost more than water is to presuppose that people are willing to pay more for them. To restate, at length, that people are wiling to pay more is not to answer the question. By leaving out such landscape-providing phrases as “under a price competitive economy,” for example, this system-dependent statement is elevated to the status of universal applicability. It is a description masquerading as an explanation.
Social policy issues such as environmental management are all brought before the bar of marginality—how much are we willing to pay for the next increment of improvement?
Pollution should be reduced so long as the marginal benefit from further purification exceeds the marginal cost involved. (215)
As we might by now expect, Reynolds does not reify his technique. He is the first to admit to serious problems in American capitalism; he is the first to admit to the limits of his approach:
Cost-benefit analysis, while a useful tool of administration, is no more than a tool. In the end, the decision that a project should be undertaken involves judgments which cannot be completely documented. But trying to attach dollar values to intangibles is still a useful exercise. It makes explicit the judgments on which a decision is based instead of leaving them vague and unstated. (322)
Yet the problem is not that radicals favor vagueness. Rather the problem here is that in the absence of an adequate analysis of what stands behind those dollar signs, attaching them to “intangibles” will not make value judgments explicit; it will make monetary judgments explicit; and not in a universal context, but in the context of the prevailing capitalist system. And as the following quotation makes clear, that is a baited trap:
Proper economic performance by an industry is a positive concept. It requires that plants in the industry be of optimum scale and managed with maximum efficiency. [the state commission’s] powers are essentially negative, to prevent exorbitant prices and profits (196)
The words “positive” and “negative” are used in two senses. Narrowly, it is undeniable that profits are positive and regulation negative in our system. It is a system based on the hunt for profits. Regulation, if it comes, is a messy affair attached to that hunt. But, by omission (the characteristic crime of this book), we are led to unreflexively associate “positive” with “good” and “negative” with “bad.”—in the morally universal sense of the words. Couple his claim about making value judgments explicit with his association of profits with the Positive, and we should not be surprised if anti-capitalist policy options do not fare well in this wringer. Nor should we be surprised to find that the poor fare no better in this neutral methodology than they do in our neutral social system.
An example of the actual, rather than the apparent class bias of the methodology of choice among such economists is provided by an English study which empirically examined people’s commuting habits:
…In general, as time spent [commuting to work downtown] decreases, money cost of travel increases. There is a money-time trade-off. So, by observing who travels by which method, one can draw conclusions about people’s valuation of time. (320)
This study proved that wealthier people valued their time more highly than the rest of society since they were more willing to spend more money to buy their way out of line. Hence by filtering our reality through his Utopian model of universal freedom, the economist can couple narrow perceptions with bloated conclusions. As has been shown, this hidden bias can have clear enough political functions.
But the ideology of neutrality is pervasive. Just as the economist appears to have leveled the capitalist down to equality with the worker in significant respects, so too must he appear to be agnostic with regard to competing claims about the shape of the world. His tantalizing use of the unknown is revealing:
Perhaps the well-to-do man, whose income has allowed him to cultivate expensive tastes, has a much higher utility curve than the poor man. Perhaps he derives just as much satisfaction from his last dollar as the poor man does from his. This aristocratic line of argument may seem unconvincing, but can one prove that it is wrong? There is no way to get inside the skins of Mr. A and Mr. B, or to compare their subjective satisfactions. And this weakens the classical argument for income equality. (289)
But lest we believe that the economist is truly going to maintain a hands-off policy regarding judgments of value, we are introduced to a concept called “consumer surplus.” It is the difference between what we pay for a product and what we would have been willing to pay for it. It is the consumer’s “something for nothing,” and it serves a very useful purpose:
Suppose a good that people are used to consuming were suddenly banned from the market. Someone might argue that consumers have suffered no loss. They are no longer getting any of the product; but they aren’t spending any money on it either, so the two things cancel out. This is not correct. When there were free to buy the good, they were getting some consumer’s surplus from it, and this they have now lost. (80)
Consumer surplus serves the dual purpose of (1) embedding the notion that personal freedom (in the large sense of the word) consists of the ability to maximize choices of purchasable goods, and (2) enabling the economist to deal with the fact that one can speak of value in an extra-market sense without threatening the primacy of the market as a creator of value.
He continues:
Moreover, people would suffer a greater loss of satisfaction from the disappearance of some goods than from others. These goods, because of the location of their demand curves relative to their price, yield an unusually large amount of consumer’s surplus. This accounts for our feeling that goods are not created free and equal, that some are more important than others. This intuitive feeling has a genuine basis in fact (80)
Throughout, Reynolds displays a high degree of loftiness about the “larger” issues of the day. But the mere hint of a policy which is discordant with the infinite variety of market place freedoms (the threat to remove a good from the market), and his agnosticism is quickly abandoned.
What establishes this “objective basis in fact”? The market. And how do we come to know what is in fact valuable? By comparing how much people pay for goods with how much they would be willing to pay. So our extra-market “intuition” that some goods are more worthwhile than others is transformed into a system-dependent “fact” based on extrapolations from consumer behavior. And the threatening possibility that value can be spoken of in non-market terms is safely smothered.
His attempt to posture as a neutral with regard to the issue of poverty is also noteworthy for the speed with which it is abandoned. He is, of course, decidedly agnostic:
Poverty is clearly a matter of definition and degree. Most of us are poorer than we would like to be. Standards of living are conventional and change over time. What was acceptable in 1900 or 1940 may be considered substandard today. (291)
Or is he?
Victor Fuchs has suggested that families who have less than half the median income for the nation should be considered poor. The rationale of this is that poverty is a relative matter…Since 1950 poverty according to the Fuchs definition has remained virtually constant at about 20% of the population. In what follows, however, we shall define the poverty line in absolute terms. (292)
As earlier in the paper, we have a surface contradiction. And again, I would stress the political function that makes sense of it. The first quotation allows the reader to believe that the economist will avoid treading on delicate “philosophic” areas while the second quotation slides us into a definition infinitely more favorable to our economic system; through growth and inflation, poverty in absolute terms is quite curable.
To cure poverty is relative terms, however, is to cure hierarchy. And that cure is the essential threat this book confronts:
Public services which benefit the amorphous, inarticulate mass of the community may often be underdeveloped. In public production, just as in private production, people often have to be shown new consumption possibilities through imaginative entrepreneurship. There was little public demand for urban renewal and manpower training programs until the possibilities had been demonstrated by some enterprising public officials (315)
…members benefit from and appreciate health care, pensions, and the like when they actually receive them, even though they might not have been farsighted enough to “buy” these things by foregoing immediate wage increases. One can argue that union leader’s emphasis on supplementary benefits is a desirable corrective to worker’s shortsightedness. (264)
The essence of our system of social finance is that those with capital must be pampered or at least preserved without illusion. This special place for those who save is revealed when Reynolds refutes Marx’s notion that it is labor, not capital that creates value:
But, a Marxist would object, these other machines were also basically stored up labor; and so we the still earlier machines used to make them. So if we trace back to the time of Adam, there is nothing but stored-up labor. There is no separate productivity of capital, and capital is not entitled to any interest payment.
…This seems patently incorrect. If no one since the time of Adam had done any waiting, no capital goods would have been built. And since waiting is distasteful, capital goods are always scarce relative to the possibilities of using them. (211)
So, unless you are willing to accept a despotic centralized government ordering too many cows and insisting they be milked five times daily, this “waiting” can only be done through individualized accumulation; however distasteful those individuals may find it.
Reynolds speaks of income as a reward for varying amounts of individual ability:
Even on the simplest kind of job, some people work faster, more steadily, more productively than others. As one goes up the skill ladder, differences in ability are increasingly important. These differences arise partly from training, but there are also inherent differences in intelligence, mechanical aptitude, physical strength and nervous energy. (246)
By then aggregating all such individual success allocations, we may conclude that the class of people with the most power over our lives consists of those individuals with the largest endowment of requisite skills. It would be difficult to consciously devise a better way to deflect the reader’s attention away from those social and institutional factors which create and maintain class divisions.
And since there is risk in owning as well as working in a mine; and since the mine workers need high pay to entice them inside; so too must the capitalist be rewarded. They lead, they take risks, they deserve.
Shumperterian profit can be regarded as the rent of a productive resource—entrepreneurship. The alleged shortage of entrepreneurship in many of the less developed countries is probably due, not so much to any differences in the inherent capacities of the population as to cultural and institutional factors. (277) (emphasis added in case you missed the delicate agnostic at work, again)
Political deflection
So strong are the system-dependent ideology tugs, that the economist is capable of using contradictory evidence to prove the same point; that with regard to significant improvements, our system can be fixed but not replaced. The radical bombardment mentioned at the outset must be deflected and, politically speaking, our energies turned inward. Every ounce of this book is aimed at helping the reader keep whatever problems she finds in the system, in the system. All news is good news to the economist-as-alchemist.
Success:
Over the past century, the labor share of U.S. national income has been rising gradually…An increase in labor’s share in the functional distribution makes for greater income equality in the personal distribution. (224)
His ability to remain optimistic about capitalism’s power to solve its problems rests to no small extent on his willingness to ignore the context (the sin of omission) in which improvements—successes—have come about. Those very reforms which give him hope for the system’s future were made possible and even necessary by the struggles and sacrifices, the self-interestedness and altruism of the poor and working class. By ignoring their historical role, he can view those successes as a function of the workings of the system; not as a result of people fighting against it.
Reynolds is thus in the position to turn disadvantages (centuries of working class struggle against exploitation) into advantages (progressive legislation that resulted) and appear all the more open-minded and comprehensive for it.
Failures:
Just as he ignores the political context of those improvements, do does he give us repeated examples of context-less remedial failures. And again, defeat for the system is transmuted into positive triumph. His most prevalent picture of failed reform is the thwarting of the delicate balances at play in the market. The economist is haunted by the specter of misguided public intervention. His repeated concern that we work within some variant of our system stems from his fears of the alternative.
For him, planning that does not restore market relations—non-capitalist planning—is all but guaranteed to fail:
Without some such system, land allocation becomes haphazard and economically inefficient. Example; if no charge at all is made for land use, as is often true in the socialist countries, there will be tendency to put up low buildings. Since land is free, why conserve it? (275)
The planner may decide to produce less of some goods or a different array of styles and qualities, than consumers would really prefer, and there is no automatic corrective for such discrepancies. (12)
So strong is his belief in the individualistic nature of mankind that any form of sharing is suspect. Public regulation (the collectivized will ) may at times prove to be necessary, but it is portrayed in a consistently negative light. Even profits must be atomized. The book is peppered with instances of the public intervening in the death throes of “overextended” industries; social custom “depressing” executive salaries below their actual contribution to productivity; state agencies wrongly supporting farm prices; planners producing too few goods etc.
However flawed we may be, the properly functioning system lays tender claim to a certain Platonic immutability.
Before we discuss the two shifts which enable the economist to spread blame so evenly, we must remember, though it has not been stressed, that there is a material basis for his ideology distortions. There is a sense in which his descriptions and analyses do correspond with the reality of our social system. Our point is that the correspondence is at the level of appearances only:
The ruling ideas are nothing more than the ideal expression of the dominant material relationships grasped as ideas. Marx and Engles, the German Ideology, p64
Reynolds surface plausibility stems from the fact that the forms of equity and freedom exist. In the political, economic and legal market places, formal mechanisms for redressing grievances exist. The thrust of the Marxist critique has been to demonstrate the relative triviality of such mechanisms. The essence of Reynold’s response is his subtle use of an analytic framework which can restore substantive meaning to and hence confidence in those mechanisms.
This he has done, as our analysis has been attempting to unravel, by what may appear to be mere debating tactics. Our point here is that such tactics—such “shifts—are not simple an intellectually contrived world view. They are grounded in and reflect tensions in certain features of our real-world social structure.
One of the ways in which such real world capitalist tensions have been resolved is through government intervention. The radical sees subsequent failures as evidence against the underlying dynamics of the system. Reynolds, through two shifts, appears to use such failures as evidence against all mankind.
(1) He shifts his and our vision between his Utopia and our society, as these next two quotations, not from his chapter about Utopian competition, demonstrate:
Production of aircraft-engines is high because consumer demand for air transportation is rising rapidly. Production of railroad passenger cars is low for the opposite reason. (31)
But it remains true that unless as good or service is desired, it will not be produced. (39)
In the Utopia, the consumer is sovereign. Hence the identification of the average citizen with the final shape of the society. And hence the radical sounding critique that Reynolds himself provides is transformed as to appear as instance of mass irrationality—the perils of pure democracy. The result is a fairly universal skepticism. This skepticism ultimately rests on another, more critical shift.
(2) Reynolds is the first to admit that his Utopian model is a normative one whose purpose is to fit imperfect man with a purifying cloth. As stated, he is not threatened to hear that his model is only a model.
But his seemingly purely normative description of this Utopia contains a lurking “factual” premise. That premise states that man’s nature is selfishly self-directed. The model of an atomistic market is based, they claim, on a realistic picture of man, and man does not travel well. Transported to a collectivized setting, he will revert. And when he reverts under balance-less circumstances, there is nothing to curb him.
So just as we have been led to equate all classes in our society, this second shift amounts to equating our social system with any possible social system. However disguised that new system may be, it must come to grips with the fact that it is a human device. And humans are in all ways and in all circumstances, selfish.
Strip away the normative picture and we are left with a residue of “factual” cynicism. Hence the failures of reform within the system are blamed on failures of the species under any system. This failure is used to bolster the justification for our system.
Taking appearances for reality; taking the decision for the free choice, the miner for the mine owner, all have the effect of diffusing discontent. The system allocates. And it should allocate. What is, is best:
If buyers of company A’s product will not pay enough to cover the market price of all the resources it uses, this indicates that these resources would be more productive in some other use, and it will be best to divert them elsewhere. The rule that price must cover costs is a requirement for efficient allocation of resources, not just a requirement for business solvency. (93)
Questions about abusive use of automation in America or systemic poverty in the client nations of the free worlds can be safely reduced to matters of technocratic economic efficiency in this pleasant, self-adjusting universe:
Countries with abundant labor and little capital…will lean towards simpler methods. The relative scarcity of labor an capital is reflected in their relative prices; and these prices lead producers to choose methods which economize on the scarcer factor and make more use of the abundant one. This is efficient from the standpoint of the individual producer and also makes best use of national resources. (33)
The efficiency-maximizing mechanisms of the free market Utopia are once again transposed onto the real world. And as economic man’s vision is limited to marginal changes in pricing policies, do does the economist train us to limit our vision to marginal changes in the ground rules of that dynamic. The economist inculcates a loyalty to retaining or restoring “equilibrium” that borders on the canine. Nowhere, of course, does Reynolds come out in favor of shrunken thought, nor does he claim that our is an economic Utopia. Yet the pacifying implications of both themes pervade. We are taught to moderate, accommodate, and come to terms with the system as it is: to “think,” as the Volkswagen ads once said, “small.”
Summary
For all the apparent rigor of the chart-laden text, the unwary reader never knows when Reynolds is describing our world (reality) or filtering it through his ubiquitous model (appearance). Nor is that reader necessarily aware of why this “shiftiness” propels him in certain political directions and not in others.
By dint of out-of-context repetition, we come to feel that “utility” has an existence apart from the pleasures of which it is the sum. Utility is then associated with one’s financial options (the more the better), as accumulated goods are elevated to the status of freedom-granters. Add in a few assumptions about “human nature” extrapolated from context-less observations and distorted through the free market prism, and you find only one system capable of maximizing that utility.
You may nod yourself from a clear agreement on the desirability of being able to choose the best doctor for your disease to the accompanying thunder of a resigned or even wholehearted embrace of corporate capitalism.
The difficulties in seeing past his methodology go beyond the sheer rhetorical—though his shifts are often dazzling. It must be remembered that his work represents the dominant ideology; the way we have been taught to perceive social reality from birth. And his is not simply a book of lies. It represents a well developed, internally coherent world view which is not penetrable at will. Finally, the form of the free market democracy does in fact exist in our society. There are elections, people do own stock, go shopping and change jobs. All the economist has to do is point. The radical must analyze.
Radical reactions
Although this is clearly not the place for such analysis, we made two admonitions to radicals and conclude with a general perspective on what separates the radicals from those currently in the mainstream.
The first admonition is not to take the mainstream economist as he takes the world—at face value. The radical should avoid the temptation to attack straightforward incompetence. What should be attacked is the economist masquerading as a neutral theoretician with a universally applicable conceptual apparatus; when to the radical, he is simply a stockbroker with pretensions.
The other admonition is to avoid attacking the Cinderella-like quality of the free market Utopia. Aside from the fact that the existence of a goal is not a requirement for its quest, such criticism allows the problems of economics to be defined in terms of the proximity of the world that that model; thus tacitly granting desirability to an individualistic, competitive goal.
The economist, no less than the radical, sees the competition between worker and owner. But when the former attempts to justify capitalism, that competition slips quietly into the slumber land of equilibrium, and the competition between capitalist and capitalist comes to the fore. And that competition can at least keep prices down.
The notion of monopoly provides a peg from which the hand the key differentiating feature of radical and non-radical thought.
A key feature of mainstream thought is the desire to divorce power from its uses and seek a neutral context in which atomistic struggles can be fairly played out. The predictable policy suggesting is to avoid “bad” monopolies.
But when liberals speak of monopoly, they are assuming and in effect forgiving what to radicals is an original sin. To the radical, the significant monopoly is that enjoyed by those who own the means of production. They fight for improvements within the context of that “sin either for humanitarian or tactical reasons; but never with an eye towards restoring a balance. If there is a grace from which we have fallen, it is not to be found in some form of private property competition.